San Francisco was ranked the 2nd most popular choice of a city to live in, just behind New York City in a new Harris poll. While many parts of the US are seeing symptoms of a real estate slump, Bay Area property values overall and the city in particular remain at all time highs. Recent figures from the California Association of Realtors show Bay Area median home prices are up 4% from a year prior to $754,630.

The popularity of SF as a real estate investment remains clear as an Englewood, Colo.-based property management company just acquired the St. Francis Place, a 410 unit building built in the early 1980’s near Moscone Center for approx $170 million. A value that puts each apartment suite on average in excess of 410,000 dollars.

However despite these high flying numbers… Actual volume of California home sales were down almost 30% in July. Many so called “experts” still predict or see a property bubble bursting , especially with 82% of recent Bay Area home purchasers holding adjustable rate & balloon mortgages. Statewide recent figures show thousands of mortage defaults this spring, statistically up almost 70% from just a year ago.

Read on for more of the latest real estate theorizing…

Those studying recent mortgage defaults like Marshall Prentice of industry monitors DataQuick, told the SF Chronicle last month

“…as far as we can tell the spike in defaults is mainly the result of slowing price appreciation. It makes it harder for people behind on their mortgage to sell their homes and pay off the lender.”

Even though respondants of the latest national Harris poll cited California as the nation’s top choice to live in, the California Association of Realtors has data showing the percentage of Bay Area buyers who could afford a median-price house in the region plunged from 20 percent in July 2003 to 14 percent by July 2004. Even though the Bay Area appears to be on the wishlist for many folks, the region as a whole has lost approx half a million residents since the turn of the century. The city of San Francisco alone having lost 10% of it’s residents from 2000 to 2004 at what was considered the fastest rate of any metro area in the nation.

Already, as interest rates increase, Craiglist Bay Area Real Estate Listings show dozens of inflated price properties that have had to reduce their prices. Indeed houses are no longer subject to instant bidding wars, but can remain on the market for many months, on average 7, which is twice as long as just a year ago.

According to some theorists, it is actually more efficient to rent in the Bay Area currently than to buy in. Even with the tax deductibility of mortgage interest figured in, owning may not be your best interest at this time. Assuming a 6% interest rate on a $700,000 home, a buyer loses approx $5000 per month by buying a house he could rent for $1800. Renting is a loss of course, but buying itself can even be a net loss as well.

Some claim that real estate is the safest investment, and while over time this is generally true, prices do flucuate, ex San Francisco housing prices dropped 11 percent between 1990 and 1994. This may have just been post earthquake jitters, but today many local over extended homeowners could easily default on loans if property values flucuated downward.

Figure out your own situation with the rent vs own calculator at http://www.cepr.net/calculators/hb/hcc.html